TyroCity: Business Studies XI Notes

Sources of office information : internal and external

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Internal communication
All the communication that takes place in carrying out works and tasks within a business is known as internal communication. It is helpful for office works. This is the communication that takes place among the business managers, employees and workers to create, implement and to make plans. It helps to maintain coordination. It is classified into inter departmental and interdepartmental It includes letters, memos, reports, announcement, circular etc.

External communication
When people of one organization transmit information to the people of other organization, then that communication is called external communication. It maintains good relationship with outsiders such as supplier, customers etc. It is very important for the business. It is classified into two types: Inward communication and outward communication.

Business environment : concept and components (internal and external)

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Business establishes, grows or operates and dies in environment. It exchanges resources in environment. It collects inputs i.e. Man money, materials, machines etc. And provides output i.e. Goods and services in the environment. Environment means surrounding. Business environment defines as a force that affects on organizational performance. It includes internal an eternal factors. It provides opportunities and threats.

1. Internal environment
It is defined as all the forces or conditions that are available within an environment that affects on organization and business. It is also known as controllable factors because business can control them. It includes

Employees:
Business hires employees. It is the major internal factor. It works inside the business. It can be controlled by the business. Employees differ in skill, knowledge, morality, and attitude and so on. When managers and employees have difference in goals and beliefs then conflict may arise. The task of management is to divide the work and assign the work to the suitable employee and handle the conflict.
Shareholders:
Management deals with many shareholders. Shareholders have the right of ownership, power of management and voting right. The actual management of organization is carried out by elected representative of shareholders jointly known as boar of directors. Boards of directors have the responsibility of overseeing the management of organization. It plays the major role in formation of objectives, policies, strategies of the organization as well as their implementation.
Organization structure:
It is located inside the organization. The arrangement of various facilities, pattern of relationships among the various department, responsibility, authority and communication is the organization structure. It also included specialization and span of control.
Organization culture:
The sets of values that help the members to understand what organization stand for how it does work, what it considers, cultural values of business forces of business and so on. It helps in direction of activities.

2. External environment (PEST)

All the forces and condition that cannot be controlled by the business is called external environment. It is also known as uncontrollable factors because business can’t control them. It is located outside the business. It affects on organizational performance.

It includes:

Economic environment:
It indicates the condition of economy in which business organization operates. It has continuous and great impact on business. It includes national income, production, inflation, savings, investment, price, government activities. Business person must have constant watch on this factor.
Political or legal environment
It is defined as rules and regulations determined by the government. Business must fulfill demand of government. There should be non violation of rules and regulation of government. Business should avoid unfair trade and should provide essential information to the government.
Social environment:
Business must have good environment where a business can be established neatly. Business also helps in employment opportunities generation. There should be socio-cultural understanding and application of anti pollution measures.

Technological environment:
It defines about the methods available for converting resources into product or services. It transforms inputs into output. Input means material, capital, man, machine. It affects on business. It helps to change the level of job, skill, and product and so on. There can be innovation, development of scientific techniques which encouraged mass production and distribution.

Types of company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Types of company on the basis of incorporation

Chartered company
A chartered company is established by the royal charter or a special sanction granted by the head of the state. East India company, Hudson’s bay are the examples of this type of company. This type of company is no more popular today.

Statutory company
A company created by the special act of the parliament is called statutory company. Its objectives, powers and activities are defined by the act. Nepal Rastra Bank, Agriculture Development Bank, Nepal Industrial Development Corporation are some examples.

Registered company
It is formed under company act of the country. The working of registered company is governed by the provision of the company act. Himal Cement Company, Gorkha Biscuits Pvt Ltd is some examples.

Types of company on the basis of liability

Unlimited company
It is a company in which the liability of the members is unlimited like that of partnership firm. If the assets of the company are not sufficient for satisfying the claims of the creditors, the shareholders are liable to pay more than the face or nominal value of shares held by them even form their personal property.

Company limited by shares
A company limited by shares is registered under the provisions of the Company act with a specific amount of share capital divided into a definite number of shares. The liability of shareholders is limited to the extent of face value of the shares they have paid for. This type of company is quite common these days.

Company limited by guarantee
The company, under which each shareholder promises to pay a specific sum as guarantee at the time of winding up of company, is called company limited by guarantee. Such guarantee is specified in the Memorandum of Association of the company. The amount of such guarantee may differ from member to member.

On the basis of ownership

Government companies
A government company is a company in which no less than 51 % of the paid up share capital is held by the government

Non government companies
A company which is not a government undertaking is called non government company. Generally, company owned, managed and controlled by the private sector come under this category.

Types of company on the basis of number of members

Private company
A private company is a company which, by its Memorandum Of Association, limits the number of its members not exceeding 50 and prohibits the sales of its shares to the general public. A private company must use the words ‘private limited (Pvt. Ltd.) in its name.

Privileges of private company

Established by single person
Does not need to publish prospectus at the time of issue of its shares
It can refuse transfer of shares from one member to another.
It is not necessary for such a company to obtain the certificate of commencement of business before starting its business activities
It is not necessary to held statutory meeting.

Public company

A public company is a company which, by its Memorandum of Association, limits the number of its members not to be at least 7 and to open the boundary of having the maximum number of shareholders to the fullest. It doesn’t prohibit the sales of its shares to the general public but rather it allows collecting major capital by offering shares to the public. The public company is governed by the authorized capital with which is registered. The shares are transferable. A public company must use the word ‘limited (Ltd.) in its name.

Privileges of public company

Established by at least 7 promoters
Needs to publish prospectus at the time of issue of its shares
It cannot refuse transfer of shares from one member to another.
It is necessary for such a company to obtain the certificate of commencement of business before starting its business activities
It is necessary to held statutory meeting.

Structure of business letters

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Business letter is one which appears well, is written well and communicated well. It includes several parts and the parts are arranged in sequence to make it meaningful. Arranging various parts in proper sequence in letter is called structure of business letter. The structure is heading, opening, body and closing:

1. Heading
Heading is used to convey a positive image of the company. Because it includes the company’s address, phone and often email. It is not necessary to include that information again in the body of the letter. Sometimes the writer will provide a direct phone number or personal email address if the action statement calls for direct communication.

Inside Address
Two spaces below the date are the full name and business address of the person to whom the letter is addressed. If several people are receiving the letter, all their names and addresses should appear. The address on the letter should be the same as the address on the envelope. As with the date, there can be legal consequences for inaccuracies. The address on the letter is presumed to be the one to which the letter is actually sent. If it is incomplete or inaccurate, a recipient can make the case that the letter was mailed to the incorrect address as well.

Date
Full date must be included in the letter. The date can be any agreement being made Because the letter is a formal document, often used in contract situations, the date can be extremely important. The letter is usually dated the same day on which it is mailed, but whatever agreements are included in the letter are considered effective as of the date of the letter.

The opening

Salutation
The formal greeting always starts with “Dear” followed by the person’s title and last name, and ending with a colon. This requires finding out whether the recipient is properly addressed as Mr., Ms. Or Dr. Attempts to avoid the issue (i.e. Substituting the title with the person’s first name, using impersonal phrases like “Mr. Or Ms” or “To Whom It May Concern”, or eliminating the salutation entirely) indicate that the writer doesn’t actually know the recipient of the letter at all, making the letter a “form” letter, a much less formal document.

Body

Context Paragraph
The first paragraph of the letter will define the context, providing a clear statement of the letter’s topic and purpose. Avoid starting a letter flowery language that doesn’t explain what the letter is about. In social letters or in letters written for businesspeople, it is appropriate to begin a letter with a question about the family or a comment about recent weather or world events. U.S. businesspeople, however, generally prefer to find out right away why the letter has been written.)

Content Paragraphs
The typical letter uses one to three paragraphs to provide the information relevant to its purpose. Each paragraph should cover a single topic or point. In the case of a long letter that covers multiple pages, it is appropriate to break the information into sections with internal headers or bullets to provide clarity.

Action Paragraph
The final paragraph of the letter provide a clear, straightforward statement of the action that will be taken be the writer, requested of the reader, or expected by a third party.

Closing
Two spaces below the final paragraph of the letter, a traditional closing line, generally “sincerely” or “respectfully,” ends the letter. If the situation calls for a warmer tone, the closing might be “cordially,” “best wishes,” or “regards.”

Signature
A four-line space allows room for a written signature immediately below the closing, then the sender’s full name is typed, with the full business title (sometimes with the department or division as well) on the next line. The signature on a business letter signifies that the writer is taking responsibility for fulfilling any commitments being made. Thus, even when the sender and recipient know each other well, a full signature is used.

When writing on behalf of a team or department, type the group’s proper name immediately above the written signature of the team’s representative.

Concept of joint stock company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Meaning of Joint Stock Company

Joint stock companies first came into being in the 18th century in Britain, and were mainly concerned with foreign trade. Initially, the organizational form was viewed with suspicion, it being supposed that it encouraged managerial efficiency and corruption. A corporation, chartered by the state in which it is headquartered is considered by law to be unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors (BOD) to oversee the major policies and decisions. The company has a life of its own and does not dissolve when ownership changes.

A company is a voluntary association, an incorporated association, an artificial person created by law, having a common seal and perpetual succession. Shareholders are owners of the company but management lies in the hands of BOD. Company means a company registered under an act.

According to H.L Haney: “A joint company is a voluntary association of individual for profit, having its capital divided into transferable shares the ownership of which is the condition of membership.”

Characteristics of public enterprises

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Some features of public enterprises

1. Government ownership: It is totally owned by government. Its majority shares are taken up by the government. In this enterprise, sometimes 50% of share is owned by the government.

2. Government management and control: It is one autonomous body which is managed and owned by government. Government controls and manages organization by appointing key personnel. It is like board of directors, managing directors, chairman and so on which manage the appointing, transfer of members and so on.

3. Public accountability: They are operated by government fund. It is also accountable to general public. It is carried out by the parliament and helps in providing goods and services for public.

4. Service motive: It provides service to the public. It provides goods and services to the public at reasonable price. It is guide by service motive but it can earn nominal profit.

5. Autonomous: It is one autonomous body which is managed and owned by government. It receives fund from the government. But government doesn’t interfere in the day-to-day activities of the organization.

6. Monopoly: Government has monopoly in this sector.

7. Separate legal entity: It is established under acts and is rum under a law. It can purchase and sell securities, can enter into any contract, can sue and can be sued.

8. Stability: It is generally stable and perpetual in nature.

Characteristics of joint stock company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Compulsory incorporation:
A company is a voluntary association of persons formed and incorporated under the existing Corrine law. Only when it gets certificate o incorporation it comes into existence as a body corporate.

Artificial person:
A company is an artificial person created by law. It is created by legal process and not by natural birth. Even though it has no natural personality, it has legal personality. Therefore, it can enter into contracts, sue and can be sued, own property, appoint employees and borrow money like any other natural person.

Common seal:
Since a company is an artificial person having no physical features like a natural person, it cannot sign. Hence, every company by law must have a common seal in which its name is engraved. The common seal can serve as its signature. The common seal is fixed on all important documents and contracts which is witnessed by signature of two directors and countersigned by secretary where ever required. The common seal is kept under the custody of directors.

Perpetual succession:
Since every company has separate existence from its members, directors and employees, their death, insolvency or insanity will not affect its life and existence. Men may come, and they may go but a company remains forever. It can be wound up under the provision of the act.

Limited liability:
Usually the liability of members of a company is limited to the extent of uncalled or unpaid shares held by them. Their personal property cannot be seized to meet the company’s liability beyond the above mentioned liability.

Share capital:
The capital required by the company is raised by the issue of its shares. The share is a document that acknowledges the ownership of the company. The members who hold the share of a company can transfer its ownership to any other person, without the company’s permission.

Separation of ownership and capital:
In company organization the ownership and management are separate. The shareholders who are the owners do not take active part in the everyday affairs of the company. Instead, they elect their representative known as directors, who with the help of managers and employees manage the company. Thus, there is division of labor and specialization.

Legal entity:
Since the company is created by law, it has separate legal existence compared to its members. Therefore, the members cannot be personally held responsible for the acts of company and company cannot be held liable for the acts of the members.

Large membership:
The Company is owned by many members- maximum of 50 in the case of private limited company and unlimited number of member in the case of public limited company.

Concept of business communication

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Meaning of business communication

The word communication is derived from the word “communis” which means to inform or tell information. Communication is the process of transformation of information from one person to another. It is a process of exchanging opinions ideas, feelings, information, views and other fast between or among two or more people. It involves the systematic and continuous process of telling, listening and understanding. Communication skill means conveying the message to others and understanding the message from others. Business communication is a bridge of passing information between the management and the employees.

Importance of filing

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Some importance of filing:

It helps in increasing efficiency of office because filing helps in providing records in required time to make quick decisions
Filing helps in protection of important documents from fire, dust, insects, theft and mishandling.
Previous records are base of past records, and they are used as an immediate reference.
It helps in documentation of proof and legal evidence in the time of disputes
It helps in formulation of future planning
It helps in providing legal proofs to fulfill legal formalities
It helps in handling customers and correspondence carefully to maintain the goodwill of the office
It helps in taking feedback.

Merits of multinational companies

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

1. Quality: it provides and produces quality goods. It produces goods which can satisfy the international customers too. It has huge investment and consists of trained and qualified personnel and specialists. It uses advanced technology to produce quality goods.

2. Mass production: it produces huge number of quality goods to satisfy the customers from all around the world. It must supply the goods constantly worldwide. Advanced technologies are used for mass production.

3. Low cost of production: the cost of production is also low. It produces goods in huge quantity which increases the rate of return and decreases in the cost of production. Low cost of production is the major benefit for multinational companies

4. Employment: it provides employment opportunities to large number of people from all around the world. Most of the host countries can help to solve the unemployment problems. It helps to maintain the living standard of people. It helps in consumer satisfaction too.

5. Increase in government revenue: multinational companies produce and sell the goods in large number of quantities. It earns abnormal profit. Government from both parent and host countries can collect custom duty, income tax, sales tax etc. In that way, government can earn more revenue.

6. Increase in export: it produces commodities in international standard. They are not produced to meet the needs of local people only. Host countries have the benefit of exporting the goods in other many countries of the world where the company has been or not established. It helps largely in the export business

7. Industrialization: multinational companies help in industrialization. It brings more capital in the business and help to establish industries. It also uses advance technologies to establish industries. It helps in establishment of industries in host country too.

Types of indexing

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Types of indexing are listed below:

1. Book index

It is mostly found in register books, notebooks etc. It is simple type of indexing. In this index, book is market with alphabets on the right side of the paper in such a way so that all alphabets can be seen at a glance. Here, name of persons or documents are arranges in alphabetical order. All the related files are kept in same alphabetical section. For example, telephone diary.

Advantages

Simple method
Economic
Safety
Disadvantages
Inflexible
Problem of alphabetical order
Inconvenient

2. Loose-leaf index
It is improved form of book index. In this type of indexing, instead of using hard hound register book, book sheets or paper are used in which alphabets are market on the rig hand side of the pages. It is very flexible and cheap. It is simple to operate an easy to understand. New sheet can be easily added and can be removed easily. But there is chance of misplacement of sheets.

3. Vowel indexing
It is improved form of book index. It is generally used by large organizations. Index book is maintained on the basis of vowels. Pages are firstly selected by initial letter and then by vowel occurred after the initial letter. For example Gandhi will be recorded in section “g” and in vowel “a”. It is time-consuming. It is difficult to search when many names begin with each alphabet.

4. Visible card indexing
Here, cards are arranged in flat tray or metal frame. Each card is attached to metal hinge. Name address and other documents are visible by touching other cards. Trays are attaché vertically to metal stands. Details can be written or typed in front and back of cards. Less space is used and cards can be easily located. It saves the time. It is flexible

5. Wheel index
It is modern form of visible index. It is suitable for big organization. Here, cards are mounted round the hub of wheel. A single wheel can hold as many as 5000 cards. In these cards can taken out or inserted without disturbing other cards. It is arranged alphabetically. Wheels are rotated to find card.

Advantages

Speedy performance
Requires less space
Flexible in nature
It saves time
Disadvantages
It is costly
It is not suitable for small organization

6. Strip card index
One line entry is made in narrow strip made up of thick cardboard paper which is fitted in a frame in such a way that all the strips fitted in the frame are visible at a glance. It is flexible and expensive. There is lack of secrecy and is difficult to operate.

Defects of multinational companies

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

1. Outflow of foreign exchange: It uses local capital for their industrial development. They earn industrial development. They earn huge amount of dividend too. The foreign currencies from host countries also go out in the form of royalty and technical fees.

2. Negative effect on local industries: Multinational companies have huge market in national as well as international market. This has negatively effected on local industries. They have increased competition on local industries and are slowly replaced by multinational companies.

3. Economic exploitation: The main aim of multinational companies is to earn maximum profit. They use unused natural resources and labor, . They produce goods and services at lower cost but the market price is very high. They earn maximum profit by unfair exploitation of host country

4. Exploitation of consumers: Multinational companies produce goods and services at lower costs by using cheap local resources and labor in the host country. Due to the high cost of royalties of these commodities they charge higher price to the local consumers. As a result, local consumers are exploited.

5. Inequality of employment: There is distinction on employee between parent and host country. They provide minimum employment to local people. They provide minimum wages to the local people. They use advanced technology for the production of goods so that only highly skilled manpower which may not be available in the host countries are employed. They appoint low level employee from host countries and give low salary and high level employees from their own country and give high salary. This creates inequality in employment.